I wasn’t shocked when Amazon announced its intent to purchase Whole Foods for $13.7 billion. For years, Amazon had wanted a retail footprint, and with its experiments with Amazon Fresh and Amazon Go, grocery was an obvious target.
Grocery chains have notoriously tight margins, but Whole Foods actually operates on better margins than Amazon (5 percent versus 3 percent). This will give Amazon an even bigger edge, as it already has a track record of edging out incumbents in every market it enters.
And, ultimately, it’s all about data acquisition and analytics. Amazon will now know consumers at a very individualized level: what they read, listen to, and watch; their eating habits; and their purchase preferences. This allows Amazon to super-serve an individual across virtually every touchpoint it has with consumers based on unique preferences.
Believe it or not, brands and e-commerce entrepreneurs can learn a lot from this acquisition. You may not be in a place to purchase a multibillion-dollar company (yet), but the principles are the same no matter your size.
1. Dive deep into consumer behavior and analytics.
Amazon has done this right from day one. E-commerce providers should mimic Amazon’s ability to form a relationship with consumers and get to know their buying habits and preferences.
In a survey by JDA Software, more than 40 percent of merchandising managers said their top investments will go to big data and analytics, while only 17 percent said their current efforts were highly successful. This kind of survey is proof that the company with better insights will prevail.
The Whole Foods merger adds another spoke to Amazon’s wheel of consumer engagement. It suggests a trend that other e-commerce providers should pay close attention to: It’s not just about collecting data; it’s what you do with the data that matters. Consumers expect to be known and catered to by brands they engage with.
2. Hop on the lifestyle trend.
Along those lines, note the lifestyle trend and embrace it! Consumers ultimately want to have their lives made easier and to save time and money while having their needs met.
PR firm Walker Sands does an annual study on the future of retail, and its most recent study predicts a growing trend in consumers expecting shopping to be easy and inexpensive. Dave Parro, partner and vice president of the firm, says, “The priority for retailers no longer lies in increasing the number of consumers who shop online, but rather improving their experience — whether it be online, in store, or across different product categories.”
It’s a simple formula, really: Remove friction to create a seamless, enjoyable shopping experience that caters to consumer habits. Executed effectively, this will nearly always build long-term customer loyalty.
3. Be certain that relationships make sense.
If you still think of Amazon as just an online bookstore, the Whole Foods merger probably makes no sense.
However, it’s a pretty good bet that many consumers who shop at Whole Foods are also Amazon Prime subscribers. In fact, at the end of 2016, nearly 75 percent of households with more than $112,000 in annual income were Prime members, and the typical Whole Foods customer has more than $1,000 in monthly discretionary income.
The combination of the two companies working together should create an enriching experience that results in higher overall consumer satisfaction. Look for that kind of win-win situation when considering your own relationships — whether as potential acquisitions or just as strategic partners.